4 Things to Consider Before Refinancing

While refinancing is a good option for many, it isn’t always the best option. Financial experts agree that you should consider several things before signing on the dotted line.

Here are four things you need to consider before refinancing:


1.) Cost

Refinancing isn’t free. Thus you should consider if you have the extra money to pay for the expenses. Also consider your personal budget and how a potential increase in monthly payments will impact your finances.

Some out-of-pocket expenses include:
Property appraisal ($200-$400)
Title insurance (approximately 5% of the purchase price)
Application Fee ($65-$640)
Loan Origination Fee ($2,130 to $3,105 with a 5% down payment; $1,984 to $2,865 with a 10% down payment)
Points (0%-3% of loan amount)
Home Inspection ($300-$500)

2.) Time

How long do you want to live in your current house?

Combine the out-of-pocket expenses of refinancing with the fact that many homeowners cash out the equity in their home to make improvements/renovations, pay bills, or go on vacation, the time it will take to pay off you expenses should be considered. How long will it take for your new interest savings to pay off the property appraisal, title insurance, and other costs? If you move before you have recouped the refinance costs, you will lose money on the deal.

3.) Credit

What is your current credit score?

Your score will effect whether or not you get approved for a refinance loan and the amount of interest and fees you will pay. Before applying for a home equity loan or a home refinance loan, make sure your credit is in the best shape possible. Check you credit with a free report and close any unused credit cards. All open credit cards count as potential debt when being considered for a loan. So if you have a $7000 credit limit at a local hardware store, even if you owe them nothing, will count negatively against you.

4.)  A Better Broker

Not all brokers are the same, so do your research. Find someone who is well educated and who will go out of his way to find you the best deal. Also, using a broker as opposed to going directly to a bank opens up your possibility of getting the best deal. A mortgage broker’s primary goal should be saving their clients as much money as possible by offering the best advice for an individuals circumstances.

courtesy of:  http://departmentofinance.com/


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